Managed Services Commoditization: Myth or Reality?

Charles Weaver, president of the MSPAlliance, writes in his blog that commoditization of managed services is a myth that is perpetuated by scare tactics by large vendors, pressure by customers and managed service providers quick to drop prices for fear of an unknown future.

As Weaver writes: “The commodity talk is almost entirely created by MSP’s who are concerned about the future. Let’s not make a hypothetical scenario into reality. Managed services will only become a commodity if we allow it. If MSP’s continue to mature and educate their clients, the sooner this industry will leave the commodity talk behind and move onto more important things.

>> Click here to read Weaver’s blog

Channel Insider doesn’t entirely agree with Weaver on this matter. Weaver is correct in that controlling commoditization is somewhat in the hands of managed service providers. The managed services market is still relatively immature as a technology delivery and under-distributed in terms of providers to potential customers. Dropping prices just because some customers don’t understand the model will almost certainly lead to an artificially expedited commoditized market.

That said, Channel Insider believes some managed services and software as a service will almost certainly become commoditized as delivery of those services become simplified. As an example, Microsoft’s entry into Exchange email as a service likely will cause prices for such services to fall. It’s not because Microsoft can afford to offer lower prices, but rather the removal of complex processes in setting up the service. Now that Exchange in the cloud can be bought and configured through a Web portal, it leaves little room for value-added services provided by MSPs and VARs.

Where there’s mystery, there’s margin, and there’s still a lot of mystery around managed and SAAS services. As Microsoft’s Ross Brown told Channel Insider, “The more complex the offering, the more you’ll need boots on the ground.” And boots on the ground is where solution providers will make money.

What do you think about the commoditization of managed services? Share your thoughts with Channel Insider and/or MSPAlliance.

>> Click here to read more of Charles Weaver’s blog